How much higher does the wall of worry go?

I don't have a lot of market experience, but I know the rule of thumb is that markets don't put in major highs until the proverbial "everyone" is bullish or major lows until everyone is bearish. The old saying goes there's nothing but good news at the highs, and nothing but bad news at the lows.

For instance, I didn't pay attention to the markets then but I've heard stories of how crazy things were in 1999-2000 and how much mainstream enthusiasm there was around the stock markets which kept making new all-time highs. I also know how much enthusiasm there was around house prices and easy borrowing in 2006-7, with house flipping starting to get a lot of mainstream interest as an easy way to get rich, and the Dow making all-time highs.

Also, bring up a chart of $SSEC from 05-07. I heard from a friend who was in Shanghai a few months before the market topped and he said the level of public interest in the market was palpable in the media there. In fact, there were complimentary stock market guides in his hotel room!

For almost 3 years the US markets have climbed relentlessly. Yet, I still don't see any signs of mainstream enthusiasm about the market or the economy. Most regular people I talk to don't trust the market after the rollercoaster of the last 10 years, they're cautious. Most people are not positive about the economy. One of the most popular financial blogs (if not the most popular) among retail traders is Zero Hedge. There's a new show on tv called "Doomsday Preppers". I hear about investors pulling money out of the market and low volumes. Does this seem like a major market top environment, on the brink of a crash?

I don't know what's going to happen. I'm not predicting anything. But over the past year I keep thinking who's to say the S&P won't make new all-time highs? Even if this market is being propped up by stimulus money who's to say it can't continue to be propped up for a couple more years to come? Who's to say they won't keep on pushing it higher until the public finally starts getting on board with the idea that everything's ok and the future looks rosy.... and then banks finally have someone to unload to.

This just came to mind again lately because over the past couple of weeks it has felt like everyone is short. And I get this feeling that it won't take much to trigger a short squeeze.

DV, you do realize the S&P 500 was trading at 1500 in 1999. In other words, over the last 13 years, the market is down close to 200 handles. One could make the argument that for over a decade we have been in a major consolidation pattern waiting to breakout. It all depends on your point of reference.

This just came to mind again lately because over the past couple of weeks it has felt like everyone is short. And I get this feeling that it won't take much to trigger a short squeeze.

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May be true of ET 1-lot pikers and fringe bloggers. Definitely NOT true of big funds and money managers who actually move the markets. Sentiment is extremely bullish, mufu cash at record lows, on and on ad infinitum.

The only 'problem' is that everyone is constantly on alert for a market crash, and after a down day or two all the water sloshes from one side of the tank to the other. One the one hand this makes it difficult to gain momentum as shorts pile in. On the other, a downmove that lasts more than a couple days will quickly turn into a rout as everyone races to liquidate at once.